Caravan company collapses: can paying by credit card save your deposit?

A string of caravan company collapses has left hundreds of customers out of pocket, with tens of thousands of dollars in deposits lost. The recent insolvencies have raised concerns about the risks of paying deposits by cash or credit card, and whether using a credit card can provide any protection.

"There is no risk-free way of doing anything these days," Deloitte senior liquidator Richard Hughes said. "You have to be really careful."

Credit card payments offer some protection

Mr. Hughes, who helped creditors recover funds from the collapsed whitegoods company Kleenmaid, which owed $100 million, says credit card payments can be a good form of insurance. His forensic examination of Kleenmaid's books found customers were set to lose $25 million in deposits, but when he realized half of those had been paid on credit card, he was able to help get $12.5 million back into customers' bank accounts.

This was through charge back requests, which allow customers to dispute transactions if they did not receive the goods or services they paid for.

How charge back requests work

The Australian Banking Association explains that when someone pays for goods or services by card and does not receive them, they can ask their bank to dispute the transaction. "The rules are set and administered by the card schemes, such as Visa and Mastercard — time limits apply, so customers should contact their bank as soon as possible," a spokesperson said.

"If the claim succeeds, the money goes back to the customer and is taken from the business's bank," the spokesperson said. "Payments by cash don't carry charge back rights."

Checking a business's financial health

Customers are encouraged to do a financial health check on the business they are putting their faith in. ASIC says warning signs include bad reviews, ongoing losses, board disputes and director resignations, or loss of management personnel.

"We remain committed to promoting responsible business practice, transparency and consumer confidence across the caravan and RV industry," Caravanning Queensland chief executive Jason Plant said.

What happens when a company goes into liquidation?

When a company goes into liquidation, creditors want to know if they will get their money back. According to ASIC, in most small to medium-sized corporate insolvencies, 97 per cent of creditors received between 0–11 cents in the dollar.

In the recent cases of collapsed caravan companies, the majority of customers have not been able to get their money back, and have seen their savings vanish.